SEDRO-WOOLLEY — After more than a year of negotiations, PeaceHealth has taken the first formal step toward leasing and operating United General Hospital and cementing an affiliation between the two entities.

PeaceHealth sent a letter of intent to the state Department of Health Thursday, outlining the nonprofit’s desire to pursue a certificate of need to transfer United General’s bed license to PeaceHealth.

The Certificate of Need is a regulatory process that requires health care providers to obtain state approval before building new facilities or offering new services, according to the department website. It is intended to make sure communities need those facilities or services to provide quality care.

“It begins the formal process of forming an alliance,” Valerie Stafford, director of communications and development at United General, said Friday. The next step is a formal application.

The letter states that PeaceHealth St. Joseph Medical Center will provide health care operations in Public Hospital District 304 for 30 years and lease certain facilities and equipment.

The estimated cost of the project is $1.1 million, the letter states.

Stafford said the formal application could be filed with the state by late November. It will spell out in greater detail what services will be offered through the agreement, cost and service area. Governing boards of PeaceHealth and United General will review the agreement and approve it before filing, Stafford said.

Stafford said under the agreement, Public Hospital District 304 will remain unchanged and its board of directors will stay on, though it may not be as involved in the day-to-day management of the hospital.

She said the agreement’s effect on hospital administration, physicians and staff is unknown as negotiations continue.

Stafford said United General reached out to PeaceHealth to eliminate redundant expenses, offer greater specialist care for the district and benefit from economies of scale in staff and buying agreements.

PeaceHealth began operating a clinic on United General’s campus in May 2010.

If the application is approved by the Department of Health, Stafford said PeaceHealth could start leasing and operating United General as soon as July 1, 2013.

Stafford said little information has been released to the public during negotiations, but United General will be planning community forums within the next few months to offer updates on the plans.

Information about PeaceHealth submitting a letter of intent was corrected Oct. 22.